Primary heats up as risk aversion wanes; Naspers, State Bank of India, Indosat, JBS price

By Christine Van Dusen

Atlanta, July 22 - As equities surged and yields on 10-year Treasuries climbed Thursday, spreads tightened, issuers printed deals and investors gravitated toward emerging market debt.

"The market is rock solid again," a London-based trader said.

Given the strong rebound, it wasn't surprising to see significantly tighter spreads and higher prices, an emerging markets strategist said.

"Argentina and Venezuela are outperforming," he said. "Argentina's discount bond is tighter by about 25 basis points. That tends to reflect the underlying sentiment."

Emerging markets have been "very active," he said. "I guess that suggests that investors are comfortable with the overall risks in Europe and the potential for a greater global slowdown in the second half than had been initially expected."

Money is "being put back to work," he said.

Risk aversion wanes

Investors looked favorably upon riskier assets on Thursday in advance of what are expected to be fairly predictable results from the European bank stress tests. Though some European officials were pushing for an earlier release of the results, which include levels of sovereign debt exposure, the unveiling remained scheduled for midday Friday.

Also impacting the picture on Thursday was news that Dubai World, which previously was blamed for a great deal of market volatility due to its financial difficulties, met with creditors and now plans to finish restructuring its debts in the coming months.

The resulting optimism was not squashed by the fact that the U.S. economy is expected to expand at a slower pace in the fall or that Hungary continues to butt heads with the International Monetary Fund over a bailout loan.

"The little bit of volatility we saw earlier didn't have much impact on placement of new debt," the strategist said.

Busy primary market

A Zurich-based trader noted there were many new issues Thursday.

On that list was Cape Town, South Africa-based media company and pay-television provider Naspers Ltd.'s $700 million 6 3/8% senior unsecured notes due 2017, which priced at par to yield Treasuries plus 400.3 bps, according to an informed market source.

Citigroup, Barclays Capital and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal, which was talked to yield 6½%.

Proceeds will be used for general corporate purposes and to repay borrowings under the company's revolving credit facility.

Also on Thursday, Mumbai-based State Bank of India priced $1 billion 4½% notes due 2015 at 99.708 to yield 4.566%, or Treasuries plus 290 bps, via Bank of America Merrill Lynch, Citigroup, Deutsche Bank, HSBC, RBS and UBS. The Rule 144A and Regulation S offering was talked at the high 200 bps to 300 bps.

Indosat, JBS print notes

In another new deal, Indonesia-based telecommunications and information service provider Indosat priced $3 billion 7 3/8% notes due 2020 at 99.478 to yield 7.45%, or Treasuries plus 452.2 bps, a market source said.

Citigroup, DBS Bank Ltd., Deutsche Bank, HSBC and RBS were the bookrunners for the Rule 144A and Regulation S deal, which was talked to yield 7½%.

Proceeds will be used to refinance $235 million guaranteed notes due in November and $109 million guaranteed notes due 2012.

The day also saw JBS Finance II Ltd., a subsidiary of Brazil beef processing and exporting firm JBS SA, price $700 million 8¼% notes due 2018 at 98.634 to yield 8½%, or Treasuries plus 614.2 bps.

The notes were priced via JPMorgan and Santander in a Rule 144A and Regulation S deal.

The yield was whispered at 8 7/8%. Proceeds will be used for general corporate purposes and for debt refinancing.

And Singapore state-owned investment fund Temasek Holdings (Pte.) Ltd. priced S$1 billion 4.2% bonds due 2050 at par, a market source said. The notes were issued under Temasek's S$10 billion guaranteed global medium-term note program, according to a company news release.

DBS Bank and Standard Chartered were the bookrunners for the Regulation S deal.

Proceeds will be used to fund the ordinary course of business.

The issuance follows the recent £200 million 4 5/8% guaranteed notes due 2022 that priced at 99.665 to yield 4.662% and the £500 million of 5 1/8% guaranteed notes due 2040 that priced at 99.55 to yield 5.155%.

Belarus, Chile plan deals

The next deal to price could come from Belarus, market sources said. The sovereign is planning an offer of eurobond notes, possibly totaling $500 million with a maturity of three to five years, with bookrunners RBS, Sberbank, Deutsche Bank and BNP Paribas.

Another deal in the works comes from Chile, which plans to issue Chilean peso-denominated notes due 2020 via bookrunners Citigroup, HSBC and JPMorgan, according to a 424B5 filing with the Securities and Exchange Commission.

Proceeds from the SEC-registered deal will be used for general government purposes.

Market-watchers were also whispering about a potential eurobond issue of Singapore dollar-denominated notes from Russia's VTB Bank via VTB Capital and OCBC Bank. This would follow the issuer's recent CHF 300 million 4% notes due 2013, which priced last week at par to yield Treasuries plus 315.5 bps.

And some sources believe Turkish lender Yapi Kredi could soon bring a new deal to market.

"A couple of things are percolating a bit," a market source said. "But things are probably going to slow down."

Ukraine alone in cancellation

After a spring season that saw many an issuer cancel planned deals, Ukraine is the only potential issuer who has bailed out in recent weeks. The sovereign has said it had received a high level of interest for its bonds but had other immediate sources of financing so did not need to move forward with a transaction.

But some sources say another force was at work. Ukraine didn't want to place the bond at "between 8½% and 9% yield," a source said, but that's all the sovereign could get during a roadshow - even though an IMF official came along for the marketing trip.

"They are single-B rated, so why should investors pay more?" he said. "So they decided to stick with IMF money and use that to pay off their Russian gas-related loans."

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